A company purchases a machine for $50 000. The two methods of depreciation being considered are the declining-balance method and the straight-line method.

1. For the declining-balance method, the salvage value of the machine after years is given by the formula
2.    
3. where is the salvage value and is the initial value of the asset.
4.  i. What is the annual rate of depreciation used in this formula?  (1 mark)
5. ii. Calculate the salvage value of the machine after 3 years, based on the given formula.  (1 mark)
2. For the straight-line method, the value of the machine is depreciated at a rate of 12.2% of the purchase price each year.
3. When will the value of the machine, using this method, be equal to the salvage value found in part (a) (ii)?  (2 marks)